Lifetime Mortgages - Interest Only Schemes

An interest only lifetime mortgage is like any ordinary mortgage you will probably have had in the past except for two features:-  you do not make any capital repayment each month, just the interest and the fact that they have no maximum term.  This means that providing you can continue to afford paying the mortgage, you can keep it going for life.   As a result with an interest only lifetime mortgage the debt doesn't build up unlike a roll up lifetime mortgage and, therefore, the amount which will need to be repaid when the property is sold, should be the same as the amount you borrowed, providing you have not taken any more or missed any payments.

This is a lifetime mortgage. To understand the features and risks ask for a personalised illustration.

Lifetime Mortgages – How they differ from roll up equity release?

In comparison with all other equity release schemes an interest only lifetime mortgage will preserve the most amount of equity in your property, which will not only mean you will leave your beneficiaries more, but you will also preserve more equity to possibly release for yourself later in life.  It will also prevent you worrying about how quickly the debt is building up especially during any periods of falling house prices.

We can't have a mortgage-we're retired!

It is a popular misconception that once retired you are unable to obtain a mortgage. Whilst it’s true that most major high street lenders are unwilling to lend beyond the age of 70 or 75, providing you live in either England or Wales, The Equity Release Centre is pleased to be able to offer a specialist Interest Only Lifetime Mortgage which can be kept going for the remainder of your life/lives. This means that providing payments remain affordable you can continue to pay the interest and therefore stop the debt from increasing. Unfortunately, we do not currently have any lenders willing to offer such interest only mortgages for life if you live in Scotland, but we do continue to search the market so it may still be worth contacting us to find out the latest situation.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Pensionable income not enough?

Again even though you are comfortable that your monthly disposable income would allow you to continue to pay interest repayments for the rest of your life (especially if you are borrowing money to clear credit cards or loans and this will considerably reduce your monthly outgoings) you may have been told by other lenders that your pensionable income isn’t enough to justify the mortgage you require, regardless of how valuable your property is.

Well if this is the case, providing you live in England or Wales, we are pleased to say that our specialist interest only lifetime mortgage provider base the amount you can borrow not on your income but instead based on your age (youngest in joint life cases) and property value. The reason for this is that their scheme also provides you with the reassurance that should you start to struggle to pay the interest (possibly because your income reduces or simply the cost of living increases too much) you can decide to stop making repayments on some or even all of the mortgage and roll up the interest instead. To find out just how much you could receive on an interest only mortgage from this specialist equity release lender use our free equity release calculator.

This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

Interest only lifetime mortgages-advantages

• Under an interest only lifetime mortgage providing you pay all payments the debt remains the same.
• Amount available can be higher for younger people than roll up schemes, as the amount is based on either pensionable income (or in the case of the specialist lender allows for the fact that the debt will not build up). 
• Ordinary Interest Only mortgages are available with relatively short term fixed or tracker rates of interest (2-5 years) and can offer no extended Early Repayment Charges, so are ideal if you feel you will want to pay back the debt in a short period e.g. from an inheritance or plannned future house move.
• Interest only lifetime mortgages preserve more equity in your property for either your own use later in life or to leave to children.
• Unlike ordinary mortgages, you enjoy a fixed interest rate for life, giving you security of budgeting as the amount due will not change for the rest of your life/lives.
• Unlike ordinary mortgages, as this is a specialist equity release scheme, SHIP approved, you have security of tenure for the rest of your life/lives, as even if payments do become uncomfortable at anytime in the future, this scheme allows you to switch some, or even all, of the interest due over to a roll up lifetime mortgage scheme, without needing to change lenders.

Interest only lifetime mortgages-disadvantages

• You need to make monthly repayments for the lifetime of the mortgage - thus increasing your expenditure compared to having no monthly repayments under a roll up lifetime mortgage.
• Offering a fixed rate for life, the interest rates available may be higher than any ordinary mortgages which might otherwise be available, although these may only offer fixed rates for up to 5 years.
• Lending or personal circumstances may change resulting in you finding it difficult, if not impossible, to meet ongoing monthly repayments, when the mortgage lender has the right to switch your plan over to roll up basis meaning you may still see the equity in your property reduce overtime.
• Should you decide to switch some or all of your interest over to a roll up basis or (because you fail to meet monthly repayments - the lender automatically switches your plan over to a roll up basis), you will incur an increased rate and an administration fee for switching it over.
• Unlike drawdown lifetime mortgages such schemes currently do not permit you to apply for the maximum amount available but just take initially just the amount you require at present, meaning it is not so flexible or easy for you to obtain further money in the future if required. It also means you may be tempted to apply for more now than you actually require, thereby increasing your monthly expenditure more than you hoped or need. 
• If you fail to keep up the mortgage repayments under an interest only lifetime mortgage your home could be repossessed (unless you choose an interest only mortgage from the specialist equity release lender we have available).  
• Although interest rates available from the ordinary mortgage lender, may be initially lower than those available under a roll up lifetime mortgage where the interest rate remains fixed or capped for life, interest only lifetime mortgage rates available from ordinary mortgage lenders are only normally fixed or track for between 2-5 years (unless you select the interest only mortgage for life offered by the specialist equity release provider as this is then offered on a fixed rate for life basis).  Thereafter you need to find a new fixed rate giving rise to new fees, or the rate would revert to the standard rate, both of which could be considerably higher at the time, leading to increased monthly repayments.
• Lending or personal circumstances may change resulting in you finding it difficult, if not impossible, to meet ongoing monthly repayments, when you may have to seek a new arrangement allowing you to roll up the interest instead.
• Ordinary mortgage lenders limit the amount available to a multiple of your pension income, which may not be sufficient for your needs.
• Mortgages established based on joint incomes, may become unmanageable on first death, possibly forcing you to either sell up and downsize just to pay off the mortgage, or to switch to a roll up lifetime equity release mortgage later just to pay the mortgage off.

Further information and advice

If you have any further questions about interest only lifetime mortgages or other equity release schemes, or would now like to arrange a free home consultation, call us today on 0800 970 4883 or complete our online enquiry form.

Now what would you like to know more about?

Clicking on any of the following links will allow you to find out more about key information on releasing equity from your home.

Drawdown Lifetime Mortgages | Fixed Repayment Lifetime Mortgages | Roll Up Lifetime Mortgages | Home Reversion Plans | How to book an appointment